Monday, December 2, 2013
The Netherlands Has Fallen Into The Austerity Trap
Simon Wren-Lewis is puzzled by the political support from center-right and center-left political parties for austerity in The Netherlands. OECD has lowered its growth forecast for 2014 to zero and it expects disinflation in 2014 and 2015 to well below the 2% target. Unemployment was only 4.3% in 2011 but OECD forecasts an increase to 8.1% in 2015. This is not good economic news and it is a predictable result of austerity measures in The Netherlands. Austerity is imposed to reduce budget deficits and it leads to higher budget deficits as a result of slower economic growth caused by austerity measures. It is a vicious cycle but politicians in The Netherlands, like politicians in the UK believe that they will not be taken seriously if they propose the use of fiscal policy to promote growth.